From the Editor: May the Best Practices Succeed

Riding out a downturn is not a time for sitting still

It comes as no real surprise that real estate
markets are cooling off. The country's been waking up to this idea
since early in the year, and coastal communities are no exception.
As Aaron Hoover reports in this month's Breakline (page 11), it's
the hottest home markets that feel the most pain when the market
cools down.

However, there is one bright note for coastal contractors in this
gloomy housing market: There is a consensus that well-established
builders will prosper, while speculators and fly-by-night
contractors will be weeded out.

According to the National Association of Home Builders (NAHB),
production and sales will slow down over the next few years in
response to higher mortgage rates. But the number of homes
constructed and renovated over the long term will depend less on
interest rates than on demographic trends. And demographics favor
the coastal contractor. People will always want to live at the
shore, along the cliffs and tidal creeks, on the islands, and by
the bays that define our country's coastlines. This trend is
bolstered by expectations that vacation-home sales will remain
strong, while sales of second homes for investment purposes are
expected to decline. In addition, remodeling of owner-occupied
homes will continue to grow, while remodeling of renter-occupied
homes will slow down. These trends suggest that work is not going
to go away entirely, and especially not in the high-end remodeling
and vacation-home markets. But overall, there'll be less work
available, and chances are good that the clients will be more
demanding. This is a market that favors high-quality custom
work.

The goal, I think, is not to hang in there until the market
rebounds, riding out the downturn like some droll weather watcher.
Rather, those who will succeed are the builders and remodelers with
ironclad reputations who can capture the work available now. And
yes, that will position them to continue to prosper in the future.

— Clayton DeKorne

What's Hot … and What's Not

In the current economic climate, here's the
latest:

What's out: Keeping prices low by working over
subcontractors to gain the narrowest margins possible.

What's in: Impeccable attention to detail, the use
of the best-quality materials available, and offering incentives
that favor long-term relationships with trade partners. (i.e.,
they're not your subs!).